As a startup company, you may need extra funding to get your business off the ground or to buy inventory. Rather than trusting any company that is willing to give you a loan, why not use the best of the best? These are some of the top business loans for new businesses.
Small Business Administration Loan
What better place to look for business loans for new businesses than the Small Business Administration? There are three different loans that start-up companies can qualify for including the Basic 7(a), Certified Development Company 504, and the Microloan program. Each of these loans has different requirements and stipulations, so it’s important to read the terms and conditions before applying.
While it can be difficult to qualify for an SBA loan and the process is long, the SBA is dedicated to providing business loans for small businesses that have reasonable interest rates and funding that can be put to good use.
Microloan from Nonprofits
Start-ups can get a loan through nonprofit organizations. The benefit of using this method is that the time it takes to process a request is relatively low, while the loans for new businesses can be as high as $10,000.
One such organization that offers start-up companies the opportunity to apply for a business loan is Accion. Through Accion, you can request a loan of up to $10,000 with apparent interest rates, no hidden payments or penalties, and flexible credit requirements.
Home Equity Line of Credit
A home equity line of credit is a business loan that is available to business owners that completely own their home. Borrowers can access the majority of their home’s equity and use the money for their small business. The interest rates vary from bank to bank, but the rates are usually much lower than that of a traditional business loan. You can get a home equity line of credit for as low as the national average—which is 5%.
Rollover for Business Startups
Have you created a sizable retirement fund through a 401k or another retirement account? You could use these savings accounts as a business loan for a new business. Using a Rollover for Business Startups (ROB) is a good way to use your retirement account to potentially create more money in the future.
To use your pension or savings as a business loan, you need to incorporate your business and have that corporation set up a qualified retirement plan. Then, you rollover your 401k or retirement account to the new retirement plan. The plan then buys shares in your corporation, which gives you money for your business.
The benefit of an ROB is that you avoid immediate taxation on retirement funds while also providing funding for a company. However, it isn’t all beneficial. ROBs also have a downside. First of all, you’re putting your retirement at risk. Additionally, it can be an expensive process with the need of third-party assistance.